The State Secrets Privilege, Contracts, Potential Fraud, and the First Circuit

Last week, I taught a one-week “premester” course on the state secrets privilege (SSP).  I taught it last year, and my libertarian students are all delighted as their communitarian professor gives them new reasons to distrust the government.  This year, we featured a guest appearance (via video conference) by the incomparable Dean Bobby Chesney as a special treat for our closing session.

We start with contracts material — the Totten doctrine, a post-Civil War case which provides that allegations that the government breached a secret agreement are non-justiciable.  The parties must know when they enter the contract that, with respect to it, their lips are “forever sealed.”  Forever?  Over a century later courts were still applying Totten even to agreements with saboteurs.  Seems like sabotage does not stay secret long if you’re doing it right.  Whatever.  

We then move on to the SSP proper, which is an evidentiary privilege first recognized in United States v. Reynolds (1953).  There, the Supreme Court recognized a privilege belonging only the the government.  It excuses the government from its discovery obligations when disclosure of the material sought through discovery would pose a risk to national security.  In Reynolds, plaintiffs’ decedents were civilian engineers killed in the crash of an Air Force B-29.   They sought a report on an investigation conducted by the Air Force.  The Air Force withheld the report, asserting the SSP (tardily, but whatever).  Without looking at the report (but whatever), which did not contain the sort of national security secrets the government claimed it did, SCOTUS upheld the SSP, and the case settled.  Decades later, when the report was declassified and relatives discovered that the government had misled the courts as to the contents of the report, they brought a coram nobis claim, which the Third Circuit rejected.  Even if the report contained nothing about the flight’s secret mission, the Russkies might have learned from the report that B-29s fly in the air at a certain altitude.  Claim denied.  Whatever. 

If the case cannot proceed without the material subject to the privilege, the case must be dismissed.  More alarmingly, if the government cannot defend itself without being able to introduce evidence subject to the SSP, the case must be dismissed.  More alarmingly still, if a plaintiff seeks recovery from a private contractor, the government may intervene and assert the privilege and shut down the case, sometimes even on a pre-Answer motion to dismiss.  One such case made me so mad, I set aside my research agenda during a sabbatical and wrote a rage-fueled 90-page manuscript.  The SSP marches on notwithstanding.

In Sakab Suadi Holding Co. v. Aljabri, we go a step further.  I did not include this case in my course, and once I try to summarize the facts, I think you will understand why.  Sakab Saudi Holding Company (Sakab) is a Saudi government entity.  It alleged that Mr. Aljabri and his associates (collectively Aljabri) defrauded it of billions of dollars.  It seems that Mr. Aljabri was an agent of Saudi Arabia’s former Crown Prince Mohammed bin Nayef, who has removed form office in 2017 and has been in detention since 2020.  In 2017 there arose a new Crown Prince over Saudi Arabia, which knew not Aljabri.  Litigation followed.

Sakab first brought suit in Canada where Aljabri resides, and where the agreeable Canadians froze Aljabri’s assets worldwide and appointed a receiver for certain assets.  Sakab then filed a complaint in Massachusetts state court seeking to give effect to the Canadian order in the US.  Big mistake.

Aljabri had the case moved to federal court.  Once there, he had his own story to tell.  He too operated as a Saudi official, and he lawfully used the funds he received from Sakab to engage in counterterrorism activities in partnership with the U.S. government. 

To make a long story short, the U.S. government intervened, asserted the privilege, and shut down the U.S. litigation.  It did not do so by demanding that the litigation come to a halt.  Rather, it submitted in camera classified affidavits indicating that the U.S. government’s interests would be endangered were Aljabri to seek to introduce evidence relating to “certain categories of information.”  The courts could not say much more about the nature of these affidavits without disclosing the very information they government was trying to protect.  

Even thought the government did not ask for dismissal, that is what it got.  Both the district court and the First Circuit concluded that there was no way for the case to proceed without the materials subject to the SSP, nor could the court grant Sakab any of the preliminary relief it requested.  

To sum up: Sakab and Aljabri had a contractual relationship that may have involved transfers of billions of dollars.  We don’t know what Aljabri did for Sakab, but it seems to have related to Saudi counterterrorism efforts, which seem to have been coordinated with U.S. national security agencies.  The U.S. government does not want any information relating to Mr. Aljabri and Sakab’s joint activities to be disclosed in U.S. court proceedings because such disclosures would do harm to U.S. foreign relations — in particular, the threatened harm is to the U.S. relationship with Saudi Arabia, one presumes.  But it was a a Saudi entity that initiated the litigation.  Seems to me that a sovereign state ought not to have its covert operations kept secret while also initiating litigation relating to those covert operations.  And so, perhaps no harm done if Sakab can get no relief in U.S. courts because of the SSP.  

Sometimes the secrets the government tries to protect through the SSP come out in foreign litigation.  We’ll see how the courts in Ontario proceed.